Mexico has insured itself against the risks of a drop in oil prices since the beginning of the 2000s, receiving four payouts worth a total of more than $14 billion.
In 2008, the country insured itself – while oil prices were at a peak – against a fall to $70 a barrel and in 2009, it received $5.1 billion. For 2015, it received $6.3 billion and for 2016 a further $2.7 billion. According to media reports, Mexico could have received up to $6 billion for last year.
But it has turned out to be an expensive undertaking. Bloomberg reported that the country paid out nearly $12 billion on options, including hedging for 2020 at a cost of $1.37 billion.
Deputy Finance Minister Gabriel Yorio said the payout covered about 80 % of the revenues Mexico would have received had prices been stable. He said Mexico was continuing its programme of hedging risk – the country hedged oil revenues in 2020 at $49 a barrel.
It was this “insurance” policy that enabled Mexico to secure more favourable terms in the OPEC+ deal struck by members of the OPEC group and other producers. Mexico agreed to reduce production by 100,000 bpd instead of the originally planned 400,000 bpd. And the United States in the end absorbed this loss in production volumes.